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Professionals Trade Union Collective to meet today

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By: Isuru Parakrama

Colombo (LNW): The Professionals Trade Union Collective is set to convene for another meeting today (30), following many demands to meet with President Ranil Wickremesinghe to discuss the questionable tax policy not being met.

Representatives of 47 trade unions responding to a number of sectors, including Health, Govt Universities, Banking, and Engineering resorted to the trade union action against the government’s controversial tax policy adding the PAYE for persons earning an income of over Rs. 100,000.

Dr. Chamil Wijesinghe, Spokesperson for the Government Medical Officers’ Association (GMOA) said all union leaders will be invited to join the discussion today.

Meanwhile, the Federation of University Teachers Association (FUTA) confirmed that they will endorse other trade union actions and intensify them from April 03, 2023, if the government fails to provide any favourable solutions.

Showery conditions to continue in several provinces

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By: Isuru Parakrama

Colombo (LNW): Showers or thundershowers will occur at a few places in Western, Sabaragamuwa and Southern provinces and in Anuradhapura, Kandy and Nuwara-Eliya districts during the afternoon or night, announced the Department of Meteorology in a statement today (30).

General public is kindly requested to take adequate precautions to minimise damages caused by temporary localised strong winds and lightning during thundershowers.

Marine Weather:

Condition of Rain:
Showers or thunder showers will occur at a few places in the sea areas off the coast extending from Mannar to Matara via Puttalam, Colombo and Galle during night.
Winds:
Winds will be South-easterly or variable in direction and wind speed will be (20-30) kmph.
State of Sea:
The sea areas around the island will be slight.

CBSL urges public not to associate with cryptocurrency

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Colombo (LNW): Considering the recent public inquiries and the developments observed relating to cryptocurrencies, which are also commonly referred to as “crypto”, the Central Bank of Sri Lanka (CBSL) wishes to reiterate to the public of the significant risks associated with using and investing in cryptocurrency. Cryptocurrency is a type of virtual currency that is generated by private entities and not by a monetary authority of a country. The term ‘cryptocurrency’ refers to a digital representation of value that is implemented using cryptography and Distributed Ledger Technology (DLT) or similar technology. It is observed that crypto-trading is widely promoted by certain entities as a profitable investment. However, recent complaints received by CBSL have shown that members of the public have incurred heavy losses on their crypto-investments and in certain instances have also been subject to financial scams conducted through crypto-related schemes.

CBSL has already highlighted, through Press Releases issued in 2018, 2021, and 2022, the significant financial, operational, legal and security related risks as well as customer protection concerns posed to users of cryptocurrency. These risks and concerns have already materialised with the recent failures of various global institutions engaged in cryptocurrency businesses, and the collapse and loss of value of some cryptocurrencies. The public is reminded that cryptocurrencies are unregulated investment instruments which are not recognized as an asset-class in Sri Lanka. Further, cryptocurrencies are not considered as legal tender in Sri Lanka and have no regulatory safeguards relating to their usage in the country. As per the Directions No. 03 of 2021 under Foreign Exchange Act, No. 12 of 2017, Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are not permitted to be used for payments related to cryptocurrency transactions. Cryptocurrency operates through informal channels, and therefore, it does not contribute to the national economy and can also cause a loss of valuable foreign currency to the country.

The public is also warned of the growing number of financial scams operating with the promise of high returns based on crypto-investments. These scams include deceiving individuals and obtaining money from them with the promise of providing a high return by investing money in cryptocurrency, as well as deceiving individuals to invest in fraudulent cryptocurrency projects. Such scams circumvent traditional regulatory and legal protection mechanisms, resulting in individuals losing their hard-earned money.

CBSL strongly advises the public to safeguard their hard-earned money and not to invest or engage in any cryptocurrency scheme offered through the Internet, other forms of media, or directly by any persons. The public is also notified that CBSL has not issued any licence or authorized any individual or business to operate schemes involving cryptocurrency, and has not authorized any Initial Coin Offerings (ICOs) or any variant of it, cryptocurrency mining operations, cryptocurrency exchanges, deposit-taking or custody services related to cryptocurrency or any cryptocurrency investment advisory service.

CBSL also urges those who are engaged in promoting and facilitating the promotion of investing and trading in cryptocurrency to refrain from such activities, considering the wide range of risks associated with cryptocurrency and the resulting hardships to the public, including financial losses.

Students should be equipped with modern technology to take over SL by 2048: President

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Colombo (LNW): President Ranil Wickremesinghe said that it is crucial for students in the country to have comprehensive knowledge of modern technology and continually update themselves with the latest advancements to prepare for the future. This will enable them to take over the country by 2048.

Additionally, the President suggested that once the economy is stabilized with the support of the IMF in four years, it would be worthwhile to evaluate whether to continue with the same old path or take a new direction that aligns with the developing world.

During the 135th Annual Prize Giving ceremony at Ananda Vidyalaya in Colombo this morning (29), President Ranil Wickremesinghe shared his thoughts. The event also included awards for students who demonstrated their talents in 2020-2021.

Upon arriving at the Vidyalaya, the President participated in religious rituals at the shrine room on the premises. He was greeted by boy scouts and received a salute from them. Additionally, he laid a floral wreath at the statue of the fallen heroes located within the Vidyalaya grounds.

Former Speaker Karu Jayasuriya was awarded the “Anandabimani Award,” a once in a life-time recognition presented to an Anandian who has demonstrated excellence in all national, religious, cultural, political, and economic aspects and has committed to promoting ethnic harmony. President Ranil Wickremesinghe conferred the award to Mr. Jayasuriya.
Additionally, the President also bestowed the Fritz Kunz Memorial Trophy, which is the school’s highest honour, to W.S. Nimsith for being the “Most Outstanding Anandian” to pass out from the school.

The statement made by President Ranil Wickremesinghe is as follows:

Professor Sampath Amaratunga reminded me of the last time I attended a prize giving ceremony in this Vidyalaya. At that time, Mr. Kudaligama was acting as the principal. I have noticed that this Vidyalaya has made great progress since then. I would like to express my thanks to all those who contributed to its success.

As part of the “Nearest School – Best School” program, I was involved in providing a seven-story building to this Vidyalaya. It’s worth noting that Ananda Vidyalaya is the only school in Sri Lanka with such a tall building. Additionally, the school also received a swimming pool and a playground.

Allow me to begin today’s story with the reason behind the establishment of Ananda Vidyalaya. During the British colonization of our country, there were no schools available for our people. The only education available was being offered in English or Dutch through church-run schools. However, the temples continued to provide educational activities as well. In the same way, Tamil education was being offered in various locations throughout Jaffna.

The year 1835 marked a significant turning point for the economy of Sri Lanka, as the Colebrook Cameron Commission report was released. This report led to a shift from the feudal economy of cinnamon cultivation to a commercial economy. This new economy was built on the cultivation of tea, coffee, rubber, and coconut. Additionally, the port of Colombo was developed into a large port, facilitating trade and commerce in the region.

As a result of the economic changes of the 19th and 20th centuries, a new commercial economy emerged. This economy first took root in Sri Lanka and later spread to other countries, including Japan. Realizing the need for skilled workers in this field, it was suggested that a school be established. The school, initially named Colombo Academy, was founded near the Fort, Hulftsdorp. This school would eventually become my alma mater, Colombo Royal Vidyalaya.

During that time, as a response to the educational needs, missionary societies established schools, including St. Thomas Vidyalaya. Recognizing that the Buddhists also required modern education, Ven. Hikkaduwe Sri Sumangala Nayaka Thera, saw the need for a modern school. At that time, the only options available to Buddhists were private education and learning in the temples. Hence, he partnered with Mr. Henry Olcott to create a school that incorporated modern education within a Buddhist environment.

The reason behind starting Ananda Vidyalaya was due to the Christian environment of the missionary system, whereas the Royal Vidyalaya of Colombo had a secular environment. Ananda Vidyalaya, on the other hand, was established with a Buddhist environment. Interestingly, the first two principals of Ananda Vidyalaya were Christians who later converted to Buddhism. Ananda Vidyalaya has produced many notable alumni who have played significant roles in shaping the independent Sri Lanka.

One such notable alumnus of Ananda Vidyalaya who was recently paid tribute to is Mr. Karu Jayasuriya, who is fondly referred to as “Ananda Abhimana”. Mr. Jayasuriya has made significant contributions to his alma mater as a Speaker, a Mayor, and a Minister, and Ananda Vidyalaya can be rightfully proud of his achievements. His service to the school is a great example for current students to follow, as it highlights the importance of contributing to society in a meaningful way.

Those currently studying at Ananda Vidyalaya are indeed fortunate. As far as my knowledge goes, Ananda Vidyalaya is the first modern school in the world to have a Buddhist environment. It’s important to express gratitude to the Ven. Hikkaduwe Sri Sumangala Thera for initiating the establishment of Ananda Vidyalaya and Vidyodaya Pirivena. Now, with the education received at Ananda Vidyalaya, students are prepared to enter society and make meaningful contributions.

The principal and the teaching staff of Ananda Vidyalaya are dedicated to providing students with the necessary training to succeed in life. It’s important for students to take full advantage of the knowledge and resources provided by the school. Student leaders are also available to provide necessary support to the teaching staff, while sports leaders and presidents of student unions help to build a well-rounded school community. Additionally, the school’s alumni are a valuable resource and provide significant assistance to the school.

As students of Ananda Vidyalaya, you have the privilege of receiving a valuable education that will equip you with the necessary skills to be leaders in society. It’s important to make the most of this education and use it to contribute positively to society. The teaching staff plays a crucial role in providing you with the training needed to succeed in your future endeavours.

Once you enter society, it becomes your responsibility to lead and contribute to building a better society. While the government and parliament have a role to play in creating a conducive environment for growth and development, it’s ultimately up to individuals to contribute towards positive change. The current state of society is fraught with crises, both political and economic, and it’s imperative for the future generation to work towards rebuilding and creating a better society.

Now the economy is being stabilized with the IMF support. If we want to develop the country, we need to get support to stabilize the economy. That alone is not enough and we have to decide as to what kind of society we need after those 4 years. We should decide if we follow the same old path or a new system to go forward along with the developing world.
Following independence, we implemented free education and healthcare, initiated the Mahaweli project, established free trade zones, and made significant strides in our economy. However, despite our efforts, we have not progressed as much as other nations like Bangladesh, Thailand, and Indonesia, and we now find ourselves stagnating.

To move forward, we must decide whether to continue stagnating or to follow the lead of these countries. Today, we need to rethink our approach and take bold new steps, with the youth community taking the lead. Unlike our time, the younger generation has access to advanced technologies like high-quality phones and computers, which we must leverage to our advantage.

Green energy presents a significant opportunity for growth and development across all sectors. Solar, wind, and offshore wind power are all viable options that we must capitalize on, just as we did with tea, coffee, and rubber in the past. It is crucial to act quickly to ensure that we lead the way in the global shift towards green hydrogen. Experts predict that we can produce at least 20 GW of green hydrogen, which will give us a significant surplus, unlike many other countries that struggle with self-sufficiency.

Green hydrogen has tremendous potential as a future fuel for ships, and our country is fortunate to have access to Green Ammonia. By making Trincomalee the main port for these resources, we can establish ourselves as a country with an energy surplus. This will enable us to generate carbon credits that other countries will buy, providing us with a valuable source of income that can be used to reduce our debt.

In addition, we must focus on developing our tourism industry. The Maldives is currently leading the way, but we have a unique advantage with our cultural heritage and scenic beauty. We have stunning beaches, rich Buddhist and Hindu religious sites, and a diverse upcountry culture that we have not fully leveraged. With more than a billion people living in India, our neighbouring country, even attracting just one million tourists can have a significant impact on our economy. We must make a concerted effort to capitalize on these opportunities and reap the benefits.

India is rapidly developing but faces a shortage of certain raw materials and limited space in their ports to meet their needs. To address this, we should focus on transforming the Colombo Port into a larger port by expanding the South and North Ports and exploring offshore economy opportunities. We need to embrace new technologies like artificial intelligence and automation to position ourselves as pioneers in this field.

It is up to the youth to lead this endeavour and build a better future for our country. Just as Ananda Vidyalaya took the lead in building a modern Sri Lanka in the 19th century, it is up to the youth of today to take charge and create a new country for the 21st century.

This cannot be achieved overnight, but it will take one or two decades. Those present here today will be in their fifties by then, so it is up to them to shape their own future.
China aims to become a developed country within 100 years, and India has set a goal of creating a modern India by 2047. Similarly, we should set our sights on achieving similar goals and take responsibility for our country’s development.
The talented youth of this school will play a crucial role in this effort, and it is up to them to take on the challenge and build a better future for Sri Lanka.

Ven Maha Sanga including Ven Ranwala Dhammarakkitha Thera and Ven Onagama Upali Thera, Former Speaker Karu Jayasuriya, Minister of Education Susil Premajayantha, SLPP Parliamentarian Dullas Alahapperuma, SJB Parliamentarian Ranjith Madduma Bandara, Senior Advisor to the President on National Security and Chief of Presidential Staff Mr Sagala Ratnayake, Education Ministry Secretary Mr M. N. Ranasinghe, UGC Chairman Prof Sampath Amarathunga, Professor Athula Kaluarachchi, Principal of Ananda Vidyalaya Mr Lal Dissanayake, Director General of the Government Information Department Mr Dinith Chinthaka Karunaratne were present at the occasion.

People involved in illicit activities at Katunayake Airport to be fined Rs. 100,000

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By: Isuru Parakrama

Colombo (LNW): The fine imposed on those engaging in various illicit activities at the Katunayake Bandaranaike International Airport (BIA) will be increased up to Rs. 100,000, revealed Ports, Naval and Aviation Minister Nimal Siripala De Silva.

Earlier, such persons were charged Rs. 25,000, and the fine will be increased accordingly, the Minister said.

He added that complaints were lodged regarding taxi drivers, transport service providers, and other officials engaging in such illicit activities at the premises.

Sarah Jasmin died in 2019 bombing in Sainthamaruthu: Police

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By: Isuru Parakrama

Colombo (LNW): A third DNA probe carried out into the suicide bombing occurred in a safe house in Sainthamaruthu on April 26, 2019 confirmed that Pulasthini Mahendran, alias Sarah Jasmin, was killed among others, the Police Media Division said in a statement.

Early speculations had claimed that Jasmin had fled to India following the April 21, 2019 Easter Sunday massacre, but according to the Police, the Department of Government Analyst now confirms that DNA test results prove 99.9999 per cent that her body was among others who were killed by the bombing in Sainthamaruthu.

Sri Lanka Original Narrative Summary: 30/03

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  1. The fourth round of negotiations on the proposed Sri Lanka – Thailand Free Trade Agreement (SLTFTA) held in Colombo, in alignment with the President’s vision of “enhancing economic relations with large and emerging economies, with a particular focus on ASEAN countries.”
  2. President Ranil Wickremesinghe says it is crucial for students in the country to have comprehensive knowledge of modern technology and continually update themselves with the latest advancements to prepare for the future; adds this will enable them to take over the country by 2048.
  3. Power and Energy Minister Kanchana Wijesekara announces that the fuel prices have dropped effective from midnight Wednesday: 01 litre of 92 octane petrol dropped by Rs. 60; 01 litre of 95 octane by Rs. 135; 01 litre of auto diesel by Rs. 80; 01 litre of super diesel by Rs. 45; 01 litre of kerosene by Rs. 10: Price drop follows a drop in bus fares and three-wheeler fares as well.
  4. Former MP Sajin Vass Gunawardena discharged from a case filed over the alleged corruption of nearly Rs. 883 million during his tenure as the CEO of state-owned Mihin Lanka: Order made by the Colombo High Court.
  5. The CBSL strongly urges the public not to promote, invest or support the promotion of cryptocurrencies in what they described as a measure “to prevent the occurrence of various losses and inconveniences associated with such schemes”; stresses no licence or authorisation is granted to any person or entity “to operate any cryptocurrency scheme and any initial coin offering or any variant thereof, crypto-mining operations, cryptocurrency exchange, crypto-related deposits and custodial services, or cryptocurrency investment advisory services.”
  6. The Police Media Division says the third DNA testing has confirmed the death of Pulasthini Mahendran, aka Sarah Jasmine, who had been speculated to have fled to India following the 2019 Easter Sunday Carnage: The statement says Jasmine was among the individuals killed in a suicide bombing that occurred in a safe house in Sainthamaruthu on April 26, 2019.
  7. Sri Lanka and Saudi Arabia sign a new agreement on the employment of workers, opening up more opportunities in the Kingdom for professionals amidst the island nation’s economic downfall: The agreement signed by Sri Lanka’s Tertiary and Vocational Education Commission and Saudi Arabia’s Takamol, which operates under the Kingdom’s Ministry of Human Resources and Social Developments.
  8. The Asian Human Rights Commission (AHRC) warns the proposed ‘Anti-Terrorism Bill’ will seriously weaken the Judiciary and the Parliament, and people will lose their right of sovereignty to exercise their franchise, their right to express opinions, and to participate in legitimate peaceful protests and to live a normal life: Also warns that an increase of crime will be consequential.
  9. Ex DIG Nalaka Silva, who was arrested and suspended on the allegation of conspiring to assassinate ex Presidents Maithripala Sirisena and Gotabaya Rajapaksa, reinstated in service: Appointed as the DIG in charge of Puttalam area: Silva’s name surfaced in 2018 following certain claims made by amateur conspiracy theorist Nalaka Kumara.
  10. Ports, Shipping and Aviation Minister Nimal Siripala De Silva says a decision has been reached to increase the fine imposed on people who engage in various illegal activities at the Katunayake Bandaranaike International Airport; stresses the fine will be increased up to Rs. 100,000.

Central bank Interest rate gamble – Stop it now or let a bank crunch?

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In last four weeks, advanced market economies led by the US showed clear signs of a banking turmoil created by deposit outflows. Financial experts attribute this to heightened interest rate risk confronted by banks consequent to rapid phase of interest rate hikes by central banks. They also alert a possible trigger of banking and financial crisis after 2008/09. Therefore, they propose central banks to suspend rate hikes immediately and permit markets to stabilize gradually.

Therefore, the objective of this short article is to present the phase of macroeconomic risks expected from present tight monetary policies and to alert policy authorities on the need for an alternative policy package to resolve such risks before they burst in the near future.

Background of interest rates hikes

The monetary policy story behind this is well articulated. Central banks commenced hiking interest rates beginning 2022 to tame rising inflation of four decades high. Present monetary policy models are driven by the policy interest rates with the price stability/low inflation as a major objective of central banks. Therefore, they do not look back until inflation is brought down to targets, i.e., 2% in advanced market economies, as they consider appropriate, irrespective of real causes of inflation and macroeconomic risks of high interest rates.

It is customary for all central banks to follow the interest rate path of advanced market economies, especially the US Fed, to prevent disruption of capital flows. Therefore, monetary policy is a simple gamble played by central banks.

The extent of rate increases so far has been about 3%-4.75% in advanced market economies. As a result, their interest rates now stand at around 3%-5% as compared to close to zero level that existed for nearly a decade after 2007/09 global financial crisis.

The rate increase by the Central Bank of Sri Lanka so far is 11%, i.e., from 5.5% to 16.5% in 6 occasions, followed in same version of advanced market economies, despite Sri Lanka being a bankrupt economy.

Inflation control power of interest rate hikes

The story is customary in monetary theory. High interest rates raise cost of credit and push brakes on credit creation. This decelerates money available for spending on goods and services and cuts down the demand in the economy. The lower demand is expected to pull down prices and inflation, given the externally determined supply.

However, central banks neither have empirical research findings on effects of interest rates on inflation outcome nor know how high interest rates get translated into lower prices and inflation in modern monetary economies with global transmission of services of money.

Therefore, inflation control story is only a concept that is followed from tribal money societies in monetary history.

Macroeconomic risks of interest rate hikes

No monetary theories are necessary to show real world risks and costs of high interest rates as they are well experienced by all segments of the economy from the government, corporates, entrepreneurs, households, fixed income earners and men on the road.

The story of downturn or recession of the economy caused by high interest rates has no debate. Even central banks expect the economy to slow down with higher rate of unemployment and lower income. This is considered as the pre-requisite to lower the demand, i.e., consumption and investment, to match the supply level of the economy. However, none has any idea of how much of recession or interest rate hike would be necessary to bring down inflation back to their targets.

The uncited risk of high interest rates is the possibility of turmoil in banking liquidity and capital that has potential of triggering a banking and financial crisis if interest rates are raised faster and kept for long time. This happens through interest rate risk generally confronts the banking business.

The clear evidence for this is the banking turmoil seen during last three weeks in the US, UK and Europe, despite the world class regulatory system. The collapse of five banks (including 17th largest bank in the US, i.e., Silicon Valley Bank and one of two largest banks in Switzerland, i.e., Credit Suisse).

Early warnings of banking crisis

The banking turmoil stated above showed several early warnings of an impending banking crisis through a liquidity crunch and a threatened-insolvency. Some of major warning were as follows.

  • Outflow of deposits to bigger banks and private investment markets causing liquidity problems to banks.
  • Gradual phase of deposit outflow by businesses and households to finance their spending due to credit crunch, high interest cost and reduced incomes which is a clear sign of liquidity problems confronted by all segments.
  • Erosion of market value of liquid assets, primarily long-term government securities and mortgaged-back securities in bank investment portfolios, due to high interest rates causing of liquidity problems immediately and insolvency threat in the medium-term.
  • Tumble of bank stock markets due to speculation of banking problems wiping out a significant value of investment.
  • Rising non-performing loans consequent to high interest cost and economic downturn/recession which is a major source of immediate liquidity problems and eventual insolvency threats.
  • Risks of asset bubble burst as usual during faster cycle of interest rates after a long period of very low interest rates which raises the level of bank non-performing loans and reduces value of loan collaterals. This was a major cause of 2007/09 global financial crisis.

In the event of a banking and financial crisis, economies will collapse globally and confront a deflationary period. Therefore, it will be inhuman for central banks to expect such kind of inflation control by high interest rates.

However, all central banks and state authorities in those countries issued abrupt public messages assuring that banking systems were sound, strong and resilient.  They also commenced blaming banks for poor risk management that has caused the turmoil. In addition, the need for another round of bank regulatory overhaul to prevent such turmoil in the future was highlighted. All these are usual habits of central banks.

Sri Lankan Context

In addition to consequences of high interest rates highlighted above, Sri Lankan banking system is hammered by historic economic crisis and instability, acute shortage of foreign currency, default of govt. foreign debt since April 2022, possible concerns over restructuring of govt. domestic debt including government securities in bank liquid asset portfolios, restriction on access to overnight borrowing from the central bank and contracted inter-bank market.

Further, insider monetary dealings to manipulate exchange rates and interest rates while mobilizing markets to take visible risks of funding the government pending debt restructuring are acts outside the interest rate policy model and would further disrupt the market mechanism.   

Therefore, the crunch in both liquidity and solvency confronted by banks in Sri Lanka is not a secret. In that context, the complacent and ambitious statement of the central bank that Sri Lankan banking system is sound and resilient is a grossly incorrect statement made without any knowledge of macroeconomic principles behind banking and current circumstances.

Concluding Remarks

  • Banking turmoil is globally evident at present consequent to rapid and high interest rate hikes by central banks. Financial media reports that nearly 180 regional and small banks in the US are under liquidity stress caused by deposit outflows.
  • The alarming concern is the electronic contagion of depositor runs 24 hours in the present electronic banking environment before bank regulators and the public see the runs physically in old style. In present form of electronic social media, the contagion across the globe will take only few hours or days.
  • Therefore, abrupt statements made by central banks and regulators that respective banking systems are sound and resilient are meaningless as such statements are based on old accounting liquidity and capital ratios/calculations. In the present context of banking turmoil and risks, individual banks are highly vulnerable and, therefore, these liquidity and capital ratios can be wiped out overnight if the situation turns bad.
  • However, four global central banks further hiked their interest rates last week and hinted further hikes, given widespread and still untamed inflation not responsive to rates hikes so far. Those are the Fed by 0.25% to 5%, European Central Bank by 0.50% to 3.75%, Bank of England by 0.25% to 4.25% and Central Bank of Switzerland by 0.50% to 1.50%. The rest will follow suit happily in coming weeks as it is their way of life. Given, four decades high inflationary pressures across the globe, there is no expectations that central banks will commence the rate cutting cycle before end of 2024. Therefore, the probability of turning the present bank turmoil into asset bubble burst and a baking crisis is very high. If that happens, the global economy will contract causing deflationary conditions that will cause central banks to cut interest rates immediately back to around zero as generally experienced in the past. Therefore, what we need is to avoid that sort of macroeconomic risks which are highly unfair in democratic societies.
  • Therefore, the time has come to accept that interest rate based monetary policy arm of central banks cannot stabilize economies by taming inflation. Therefore, they have to immediately sterilize the interest rate arm and launch a policy package encompassing of both policy arms, i.e., monetary policy and bank regulatory policy, to restore both real economic stability and financial stability which have already been poisoned by high interest rates. It is common sense that real economy and financial economy are inter-dependent and inter-catering and, therefore, both policy arms must be active in close coordination. 
  • In addition, the support of fiscal instruments is necessary to protect the public trust in the system before it fades a way in the current context because central banks have no track records of keeping economies and financial systems stable only by themselves as they are not the only game in town although they think so. If they are so capable, present inflationary pressures and banking turmoil could not have happened in front of their eyes. The fact of the matter is that central banks can protect depositors without fiscal support during bank turmoil only if they print money to bailout banks as deposits are money created in bank books under the watch of central banks.
  • Inflation in modern economies with access to the global economy is an economic outcome of imbalances among markets including money markets, i.e., commodity markets and factor markets, and, not a cause per se that troubles economies as central banks believe. Therefore, the control of inflation requires fixing market factors that led to inflation. As such, central bank to use interest rates as the only instrument to tame inflation and thereby to stabilize economies is a clear misconception. The history tells it. Therefore, central banks must eradicate the disconnect between the monetary arm, regulatory arm and fiscal arm in pursuit of stabilization of modern economies. 
  • Authorities have to ensure the safety of all depositors as the current turmoil is a conscious policy default of monetary policy arm of central banks while keeping their regulatory arm asleep as usual. Information so far reveals that the Fed failed not only to detect basic interest rate risk and liquidity risk on deposits and investments in government securities of Silicon Valley Bank, 17th largest bank in the US, despite ambitious stress testing, but also to notice that the bank did not have a Chief Risk Officer for the past 9 months. It is now revealed that bank stress tests being a new comer to bank supervisory tool box, do not cover the liquidity risk scenarios. Therefore, the customary approach to resolve banking problems and instabilities only through the regulatory policy arm disconnect from the monetary policy arm is a clear misbelief. Therefore, central banks have to wake up from the habitual sleeping mode if they are to survive in the present decade of political governance system. However, the fact that both policy arms rest in two compartments of same siberia is the hudle to wake up.
  • Therefore, the implementation of the proposed new integrated policy approach requires all rounders in central banks who understand macroeconomic management principles behind central banking in modern monetary economies.
  • The same approach is the only alternative available to bankrupt countries like Sri Lanka that require a domestic bail-in as no external parties will bail out such economies operating in disrupted markets and political governance. However, tools and composition should be different from advanced market economies due to structural differences.

(This article is released in the interest of participating in the professional dialogue to find out solutions to present economic crisis confronted by the general public consequent to the global Corona pandemic, subsequent economic disruptions and shocks both local and global and policy failures.)

P Samarasiri

Former Deputy Governor, Central Bank of Sri Lanka

(Former Director of Bank Supervision, Assistant Governor, Secretary to the Monetary Board and Compliance Officer of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 10 Economics and Banking Books and a large number of articles publish. 

The author holds BA Hons in Economics from University of Colombo, MA in Economics from University of Kansas, USA, and international training exposures in economic management and financial system regulation)

Economy Forward: https://economyforward.blogspot.com/2023/03/central-bank-interest-rate-gamble-stop.html

SRI LANKA: The proposed Anti-Terrorism Bill amounts to a parallel Constitution and a Criminal Procedure Code

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A Statement by the Asian Human Rights Commission

Three major ‘strategies’ have been used in this draft bill on anti-terrorism 2023.which create very great confusion about the meaning of the contents of the proposed law and its implications.

Three ‘strategies’

The first of these strategies is not to define the meaning of terrorism. The meaning of the key word of this document is thus kept wake so that many different and contradictory interpretations can be given in a way that could be quiet detrimental to the basic legal notions held as fundaments in Sri Lankan legal system, thus creating unresolvable contradictions and confusions on the operation of law and legal procedure in Sri Lanka. Such confusion could lead to dangerous repercussions for, individuals, groups, organizations and to the nation as a whole. Fundamental principles relating to governance, rule of law and human rights could be exposed to great danger by creating such a confusion. 

The second strategy is to blur or even to erase the distension between the laws relating to anti-terrorism and the criminal law.  Deciding whether any act or omission is crime in terms of the penal code or similar statutes or which create offenses  or whether that amounts to a crime under anti-terrorism law is left to be decided by authorities without a guiding a legal criteria to make a clear distention. Thus any interested party may twist what may amount to an allegation of crime into an accusation of commission of an act of terrorism. This way interpretation can easily depend on political factors and not on clear criteria based on law. 

This same applies also to the criminal procedure. Whether an investigation into a particular allegation into a crime will be done according to the criminal procedure code or by other methods proposed by this bill an anti-terrorism could be done entirely subjectively. The result will be disastrous on the administration of justice in Sri Lanka. 

The third is to peruse what amounts to a repeal, alteration or a fundamental change of the constitution, under the guise of an ordinary act of parliament and their by virtually displace many of the core principles on which constitution has been based. If this bill succeeds the anti-terrorism 2023 will virtually displace many of the fundamental aspects of the letter and the esprit of the liberal democratic tradition of constitutionalism in Sri Lanka. 

The Bill entitled Anti-Terrorism has been gazetted on the 17th of March, 2023.  This Bill, though it is presented as a proposed Act to be passed in the Parliament, in fact amounts to the amendment of the Constitution of the Democratic Socialist Republic of Sri Lanka in terms of Chapter 12. The basic structure and conceptual framework of the newly proposed Bill on Anti-Terrorism amounts to an implied repeal or altering or adding or a consequential amendment which has been described in Article 82(1) of the Constitution. Article 82(2) of the Constitution states that “No Bill for the repeal of the Constitution shall be placed on the Order Paper of the Parliament unless the Bill contains provisions replacing the Constitution and is described in the long title thereof as being an Act for the repeal and replacement of the Constitution”.

Although the proposed Anti-Terrorism Bill of 2023, does not mention that the purpose is for the replacing of the Constitution and nor does its’ long title express any direct intention to repeal and to replace the Constitution, the proposed Anti-Terrorism Bill amounts to however a fundamental alteration and change of the very substance of the conceptual framework as well as the structural framework of the 1978 Constitution.

While a more detailed analysis can be provided, for the time being, the nature of the proposed Bill and how it amounts to a fundamental alteration, change and amendment to the Constitution, can be summed up in the following manner.

The Constitution of Sri Lanka is based on the ‘fundamental notion of the sovereignty of the people’. Article 3 of the Constitution states that “in the Republic of Sri Lanka, sovereignty is in the people and its’ inalienable sovereignty includes the powers of the Government, fundamental rights, and the franchise.” Thereafter, in Articles 4(a), 4(b) and 4(c), the manner in which the sovereignty of the people is exercised through the Parliament, the Executive and the Judiciary are enshrined, and added to that in Articles 4(d) and 4(e) is that the fundamental rights and the franchise are an integral part of the notion of sovereignty that is embedded in the Sri Lankan Constitution.  

The proposed Anti-Terrorism Law is aimed as an alteration of this position in a most fundamental way.  

First of all, by many provisions spread through the proposed Anti-Terrorism Bill, the President directly acquires powers of control over the life of the people on matters relating to exercise of their sovereignty, and on the exercise of the Constitutional organs recognised in the Constitution, such as the Parliament and the Judiciary, exercising their functions as a part of the exercisesof the sovereign power of the people, thus, virtually paving the way to attack the right of franchise and also the fundamental rights of the people.  

Under Article 35(1), “While any person holds office as the President, no proceedings shall be instituted or continued against him/her in any court or tribunal in respect of anything done or omitted to be done by him/her either in his/her official or private capacity.”

Throughout the proposed Bill on Anti-Terrorism, large of numbers of functions which are presently exercised by various Ministries, organs of the State and other officers, are being taken by the President, directly under his/her control.  This implies that on any matters that may arise, by way of commission or omission, which at present would give rise to the right of the citizen to seek the redress of courts, are to be taken away. Thus, on very vital matters which involve arrest, detention, investigation, and many other matters, the citizens will lose the right to take up these matters before a court of law. Therefore, the legality and illegality of any of these actions will be an irrelevant matter.

This is a most fundamental violation of not only the Sri Lankan Constitution but of any constitution in a republic that claims to be based on liberal democracy.  Thus, the Sri Lankan citizens will heavily lose the protection that they have under a liberal democratic framework of governance once this Bill becomes the law.  

Thus, the enlargement of the powers of the President, achieved by means of this proposed Bill, will bring to an end the operation of the 1978 Constitution and many of its provisions automatically. There will be an alteration of the Constitution in the most fundamental manner.  

Associated with this is the issue that Sri Lanka’s Constitution is rooted in the foundational notion of the ‘rule of law’.  The very fact of an existence of a constitutional Government means that the supremacy of the law and the rule of law are taken for granted as the foundation of governance in such a country. As one of the principal thinkers of the American Constitution, Thomas Paine stated, “in the United Kingdom ,the King is the law, but in the United States, the law is the king.”  

What this Anti-Terrorism Bill does is to fundamentally change that position and to make the President the law and the law to become an unimportant factor in dealing with many of the matters in Sri Lanka which have been brought under an overall umbrella called ‘Anti-Terrorism’. Holding or not holding elections, the right of peaceful protests, the right of peaceful assembly, the legitimate right of the freedom of the press and the basic rights relating to illegal arrest and illegal detention which are most fundamental to the idea of protection and the freedom of the individual will be lost if this proposed Bill comes into effect. 

By implication, this will diminish even further the role of the Parliament. All matters which are mentioned as activities around Anti-Terrorism, will be done outside the scope of the Parliament and all the oversight functions of the Parliament on these matters, will be done by agencies which are directly controlled by the President and which are outside the control of the Parliament.  The virtual declarations of ‘emergency powers’ which were earlier under the control of the Parliament, by way of various procedures of monitoring the situation, will be completely lost if this Bill is passed.

Besides this, ‘new creatures’ have been created which in the future will exercise functions which the Constitution has given only to the Judiciary. These are the functions relating to the arrest and detention of persons and also investigations into various offences. The granting of powers to an officer not less than a person holding the rank of a Deputy Inspector General of Police (DIG), amounts to the handing over of the powers of arrest and detention, entirely to the hands of a Police officer.  The Constitution does not allow any Police officer to hold any position involving the exercise of judicial power. A DIG having the right to make detention orders for various period of time will be exercising a power that is held most sacred within any democracy and within any country that holds the rule of law as a foundational principle. All the provisions which give a DIG or persons above the DIG rank, these powers, will directly contravene fundamental provisions of the sovereignty of the people as expressed in Articles 3 and 4 of the Constitution.

Besides that, a parallel form of criminal procedure is introduced through this Anti-Terrorism Law. All criminal investigations in Sri Lanka have to be conducted within the framework of the Criminal Procedure Code and through the various powers given to various ranks of officers recognised by the Criminal Procedure Code.  

The present proposed Anti-Terrorism Law completely ignores Sri Lanka’s established Criminal Procedure Code and attempts to establish a parallel Criminal Procedure system when it comes to the Anti-Terrorism Law. Thus, there shall be two kinds of Criminal Procedures established in Sri Lanka. One which follows the Criminal Procedure Code with all the powers for all those who conduct their duties and all the protection for the citizens. Under the new Anti-Terrorism Law, all such powers will be taken away from the authorised officers, whose powers are derived from the Criminal Procedure Code and be handed over to other officers selected for that purpose, either by the President himself/herself or by the President through the Inspector General of Police.  

Besides this, many of the new agencies that are mentioned and also the new powers that have been mentioned have not been defined with any precision and without any ambiguity as required in a law. The ambiguities that are left could be utilised by any person in order to interpret this Anti-Terrorism Law in any manner that they like and therefore, all kinds of abuse will result particularly given the fact of the overall law enforcement failures and weaknesses that exist within the country.  

This new proposed Law also paves the way for the possible organising of extra-judicial killings and also the possibility of the recurrence of enforced disappearances. Once people are kept in places which are outside the normal places of detention, that is the prisons, they lose the protection that they have within the prisons, and they could be subjected to various kinds of exercises which may end up in extra-judicial killings. The practice of extra-judicial killings that is happening, even within the restricted atmosphere as it exists now, have already come under severe criticism by the Sri Lankan Supreme Court.  This situation will worsen when there are no ‘fixed safeguards’ for the protection of the people who are kept under such detention as proposed in the proposed Anti-Terrorism Law.

These also pave the way for the heavy increase of bribery and corruption within the Police. When the Police has the powers to hold people under detention for long periods, as it is proposed in this new Bill, opportunities will open up for various Police Officers of various ranks to exploit the situation for financial gains.  We have seen the example of 11 children who were abducted and kept under detention in a Navy camp and later disappeared.  It is known that they were kidnapped for the purpose of seeking ransom.  These kinds of practices will reemerge in a large scale given the kind of record that Sri Lanka has particularly within the last 40 years or so.  

Above all, Anti-Terrorism will be soon recognised more like a ‘political instrument’ for controlling those who represent dissent, those who represent various Opposition political parties, trade unions, medical associations such as the associations of doctors, and of other professions, journalists, academic associations, and all those who normally exercise their fundamental freedoms.  

Once the Anti-Terrorism Law operates, it will have a major blow on the human rights related provisions of Sri Lanka.  The defense by those who violate fundamental rights in the future will be that their actions or their omissions which amount to offences were a result of their legitimate anti-terrorism activities and therefore, they will enjoy immunity from any kind of legal action. 

The result of all these is that the Parliament and the Judiciary will be seriously weakened, people will lose their right of sovereignty to exercise their franchise, their right to express opinions, and to participate in legitimate peaceful protests and to live a normal life.  The result will be a culture of enormous fear which was a part of Sri Lankan life not long ago. In the 1980s in the South and almost about 30 years continuously in the North and the South, reminds one of a ‘nightmare nation’ where people had to live in fear and their life was threatened.  

Another consequence of all this will be the increase of crime.  The Police preoccupied with the so-called new political function of anti-terrorism will have hardly any other time to deal with normal law and order related functions.  Many times, the senior persons in the defense establishment have claimed that within the last 40 years or so, the Police function suffered a great deal because of having to deal with ‘security functions.’  Now, it will become even worse and life in Sri Lanka will be even further insecure due to the so-called Anti-Terrorism Bill. 

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The Asian Human Rights Commission (AHRC) works towards the radical rethinking and fundamental redesigning of justice institutions in order to protect and promote human rights in Asia. Established in 1984, the Hong Kong based organisation is a Laureate of the Right Livelihood Award, 2014. 

President Ranil Wickremesinghe talks to Harvard University, USAa

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President Ranil Wickremesinghe engaged with faculty and students of the prestigious Harvard University, USA, on Friday 24 March 2023, at Boylston Hall in Cambridge, Massachusetts.

The Lakshmi Mittal and Family South Asia Institute and the Center for International Development of Harvard, organized and hosted a fruitful virtual discussion that focused on contemporary developments in Sri Lanka and should be congratulated for the conduct of a successful event. The President made a short statement and answered questions from the participants on a wide range of current topics.

The Ambassador of Sri Lanka to Washington DC, Mahinda Samarasinghe was also present at the event which was well attended. This will be the first of many engagements with leading U.S. academic institutions focusing on Sri Lanka and cooperation in diverse fields.

Embassy of Sri Lanka

Washington D.C.

29 March 2023